December 2020 Experiences Brisk DST Activity

Al DiNi­co­la- Jan­u­ary 15, 2021

Secu­ri­ties offered through MSC-BD, LLC

Over the past year we have pro­vid­ed an overview of the types of DST that are being offered. This 30,000-foot view for accred­it­ed investors is called the Land­scape Sum­ma­ry.  We inter­act month­ly with many of the major spon­sors of DSTs and pro­vide updates on the avail­abil­i­ty of offer­ings in num­bers of pro­grams, equi­ty as well as oth­er com­po­nents which many poten­tial accred­it­ed investors (through their feed­back) state is impor­tant.

When look­ing at the num­bers month over month there may be some changes on the dol­lar amount of avail­abil­i­ty with some of the most notable months have $100,000,000 changes in the equi­ty when view­ing the results. The Decem­ber num­bers have a notable change from Novem­ber in the amount of $150,000,000 less equi­ty.  How­ev­er, that is only part of the results.  With­in the activ­i­ty from spon­sors and investors there was a tremen­dous change. 

Spon­sors often will grant finan­cial advi­sors and rep­re­sen­ta­tives the abil­i­ty to reserve a posi­tion for an investor for a lim­it­ed peri­od of time. The spon­sors want­ed to com­plete as many sub­scrip­tion agree­ments (typ­i­cal­ly step one) and then close on the trans­ac­tion (step two). Many investors seek­ing to close before year end reaf­firmed their reser­va­tion posi­tions and closed on their cash posi­tions. In the case of 1031 exchanges investors exe­cut­ed (closed) well ahead of the 180-day required clos­ing. As a prac­tice we assist 1031 exchange investors with iden­ti­fy­ing their poten­tial replace­ment prop­er­ties ahead of their actu­al clos­ing on their cur­rent prop­er­ty. (Occa­sion­al­ly the sale of the cur­rent prop­er­ty is called the “down-leg”).   Upon the actu­al clos­ing of the down-leg a good strat­e­gy is to have the 45-day iden­ti­fi­ca­tion list ready for sub­mis­sion to the Qual­i­fied Inter­me­di­ary (QI) or Accom­moda­tor. The oth­er part of ratio­nale for this strat­e­gy is since the DST avail­abil­i­ty changes on a week­ly basis.  New issues that come out may be quick­ly sub­scribed. The oth­er ratio­nale comes from the investor who may want his down-leg pro­ceeds rein­vest­ed soon­er rather than lat­er. Almost all our clients iden­ti­fy as soon as pos­si­ble and most close on the replace­ment prop­er­ty (occa­sion­al­ly ref­er­enced as the “up-leg”) pri­or to the 45-day peri­od and in some cas­es with 10 days of their down-leg clos­ing.

The back sto­ry would be investors want­i­ng to close as soon as pos­si­ble to put their funds to work rather than sit­ting in the QIs account, as well as the spon­sors want­i­ng to close as many posi­tions by year end.  Dur­ing the month of Decem­ber, in the offer­ings we review, there was over $350,000,000 in closed offer­ing posi­tions report­ed. In the begin­ning of Decem­ber there were 32 avail­able DST offer­ings and 18 were report­ed either ful­ly sub­scribed or over reserved. When look­ing at the cur­rent avail­able DST Equi­ty (and this changes week­ly) there is about $420,000,000.  The spon­sors were also very busy with fill­ing the pipeline with replace­ment offer­ings.

Cre­at­ing the DST pipeline takes a lot of work upfront. We have good work­ing rela­tion­ships with many of the spon­sors. Finan­cial advi­sors who spe­cial­ize in the DST space will receive advanced notice of poten­tial DST offer­ing that may be avail­able in the near future.  This pro­vides us (as well as oth­er advi­sors) the abil­i­ty to prop­er­ly align our investor needs with the best poten­tial cash invest­ment or 1031 replace­ment prop­er­ty. The mul­ti­fam­i­ly options (includ­ing the man­u­fac­tured hous­ing offer­ings) dom­i­nate the list of prop­er­ties with a con­sis­tent 50%+ of the avail­able equi­ty. The indus­tri­al space is often sought after espe­cial­ly if there is an Ama­zon involve­ment. Nec­es­sary Retail has also been very pop­u­lar and becomes ful­ly sub­scribed quick­ly. Senor hous­ings has not seen an uptick in offer­ings.  How­ev­er, the 55 Plus offer­ings seems to be pop­u­lar.  There is a dif­fer­ence between the assist­ed liv­ing (senior hous­ings) and the active 55 Plus. Stu­dent hous­ing has seen lim­it­ed offer­ings because of the cam­pus sit­u­a­tion still lin­ger­ing with the COVID sit­u­a­tion. Col­leges are attempt­ing to fig­ure out the dor­mi­to­ry and cam­pus hous­ing solu­tions.  There may be a few excep­tions where there are pop­u­la­tion shifts into states. Stu­dent hous­ing is sim­i­lar to mul­ti­fam­i­ly in design and struc­ture in some regions.  For exam­ple, there is a migra­tion of com­pa­nies from Cal­i­for­nia to Neva­da.  Many of the younger work­ers are mov­ing into the stu­dent hous­ing prop­er­ties that offer inter­net con­nec­tiv­i­ty and oth­er lifestyle com­po­nents.  These new stu­dent hous­ing offer­ings are dif­fer­ent hous­ing options then when many of us went to col­lege. Flori­da is also ben­e­fit­ing from the gen­er­al pop­u­la­tion shift from the north­east (NY, NJ, CT) to the sun­shine state.

What is the fore­cast for 2021?  Spon­sors will still be look­ing at bring­ing online mul­ti­fam­i­ly oppor­tu­ni­ties. The indus­tri­al space and dis­tri­b­u­tion should remain strong as well as the nec­es­sary retail. Select man­u­fac­tured hous­ing offer­ings as well as the 55 Plus will be offer­ings to watch. Assist­ed liv­ing and stu­dent hous­ing may be very lim­it­ed. Med­ical offer­ings which have been lim­it­ed may have an uptick.

We are await­ing the new administration’s plans for the coun­try.  There has been spec­u­la­tion that Mr. Biden’s plans include some changes to the 1031 tax deferred exchange.  Please look for our next blog arti­cle on the unin­tend­ed out­comes if the 1031 exchange in altered or elim­i­nat­ed. Cur­rent­ly the cash investors are seek­ing tax pre­ferred returns and the 1031 Exchang­ers are seek­ing to uti­lize the ben­e­fits pro­vid­ed.

DSTs are not for all investors.  The acqui­si­tion of a DST is for accred­it­ed investors only.  Con­tact your invest­ment advis­er for addi­tion­al details on how a DST may be a solu­tion to your 1031 Exchange and suit­ed for your invest­ment future. For more infor­ma­tion on how to prop­er­ly set up an IRC 1031 Tax Deferred Exchange or if you are an accred­it­ed investor and would like addi­tion­al infor­ma­tion on a DST con­tact Al DiNi­co­la at 239–691-8098 or email adinicola@dst.investments.

This is not an offer to pur­chase or solic­i­ta­tion to pur­chase any secu­ri­ty, as such be made only through an offer­ing mem­o­ran­dum or prospec­tus.  Invest­ing in secu­ri­ties, real estate or any invest­ment, whether pub­lic or pri­vate, involves risk, includ­ing but not lim­it­ed to the poten­tial of los­ing some or all of your invest­ment dol­lars when you invest in secu­ri­ties. You should review any planned finan­cial trans­ac­tions that may have tax or legal impli­ca­tions with your per­son­al tax or legal advi­sor.   DST Invest­ments, LLC is a Reg­is­tered Invest­ment Advi­sor, reg­u­lat­ed by SEC (Secu­ri­ties and Exchange Com­mis­sion). Our cor­po­rate office is locat­ed at 999 Van­der­bilt Beach Road, Suite 200, Naples Flori­da 34108. Secu­ri­ties Offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC. 410 Peachtree Park­way Suite 4245, Cum­ming, GA 30041